Cuomo’s Gift to Islanders Could Be Worth Nine Figures

State agency never assessed value of Belmont Park property before leasing it for new arena

March 5, 2018

Forty-three acres of Belmont Park land could be yours for a song, if you own a major sports franchise.Kevin P. Coughlin/Office of Governor Andrew M. Cuomo

Ever since Governor Andrew Cuomo’s Empire State Development agency decreed a group led by the owners of the New York Islanders to be the winning bidders for a 43-acre plot of land in the Belmont Park racetrack parking lots in December, most of the concern has been about getting fans to and from games: How much will it cost to run 24-7 LIRR service to the new hockey arena, if the feat is even physically possible at all?

But another element to the deal has gotten less attention: the $40 million lump sum that Isles owners Jon Ledecky and Scott Malkin and their development partners — including the Mets owners’ Sterling Project Development and Oak View Group, an arena company partly owned by Madison Square Garden — will pay for the state land they’ll be using for the arena. The initial ESD announcement didn’t say how that figure was arrived at, so there’s been no way to tell if this was fair market value or a massive giveaway that would help underwrite the project’s $1 billion construction cost.

Now we have a partial answer: Nobody at the state bothered to check. In response to a Voice Freedom of Information Law request for any land value assessments provided by or to ESD for either the Islanders plot or any neighboring parcels, the agency has replied: “Please be advised ESD has no record responsive to your request.” In other words, Cuomo’s development agency has agreed to lease a prime piece of development land to a consortium of sports developers — and didn’t even check to see how much it could charge in rent for the public property.

Conducting land assessments is way more art than science, but the simplest method, property experts agree, is to look for comparables: other similar land nearby that can be used to gauge the going price per square foot in the vicinity.

“If it’s not really an exceptional property, you can look at comparable sale prices,” says New York City Independent Budget Office deputy director George Sweeting. Of course, a hockey arena is about the most exceptional property imaginable, and given that so many of them get discounted land deals, one can’t look at, say, what the Rangers are paying to lease the site of Madison Square Garden. Sweeting says an alternative method would be to try to reverse engineer a value based on capitalizing how much revenue a hockey arena could generate — though “again, there are only two or three hockey arenas [in the New York area] to look at to get any sense of what they earn, and it’s really hard to tell what’s the income from hockey versus whatever else goes on at the Garden.”

Going just by properties that are comparable geographically and in terms of use, the Islanders owners could well be getting away with a steal. A scan of Zillow shows one plot of land in neighboring Elmont for sale at $61 per square foot; in Floral Park just to the north, there’s a lot for $182 per square foot. (Norman Oder of Atlantic Yards/Pacific Park Reporthas noted that a video lottery operator paid $130 per square foot in 2010 for land at Aqueduct Park racetrack, which is in the same ballpark.) Converting into acres, that gets us an expected value for the Belmont Park land of anywhere from $114 million to $340 million — which would mean the arena developers are getting anywhere from a $74 million to $300 million discount on the land, courtesy of New York state taxpayers.

(A spokesperson for the Islanders declined to comment for this article.)

This would not be the first case of a sports team owner offering to build a “privately financed” venue while trying to sneak in a mammoth land giveaway. In 2013, Los Angeles Angels owner Arte Moreno cut a deal with the Anaheim City Council where he would pay for $150 million in renovations to his team’s home stadium, in exchange for getting 155 acres of neighboring land to develop at a cost of just one dollar. When Anaheim mayor Tom Tait balked and demanded an independent assessment of the land’s value, it turned out to be $245 million — meaning Moreno would have gotten his entire renovation paid for, and then some, through the value of his free land.

Of course, the other bidders for the Belmont site — the owners of the New York City F.C. soccer team and Blumenfeld Development Group, which dropped out during bidding while complaining of “a selection process that has been pre-determined” — might not have been offered anything more, prevailing rates per square foot be damned. But there’s no sure way to tell: Getting the best value for its land was weighted by ESD at only 20 percent of the basis for its decision, and the agency has routinely rejected all attempts to see the competing bids (including the Voice’s own FOIL request) as containing information that “if disclosed would impair present or imminent contract awards” — even though the contract award in this case was already made two months ago. The bid documents, explains an ESD spokesperson, won’t be made public until an environmental impact study is concluded in 2019 and the contract is officially awarded — a policy justified as necessary to prevent competing bidders from getting a leg up, but which also conveniently means that no one will know what the state’s other options were until it’s too late to change their minds.

State senator Liz Krueger, a longtime critic of untoward state spending on private projects — such as environmental cleanup funds being redirected to “redevelopment credits” — says she finds it “disturbing” that the state “would go into a 49-year lease with no evaluation of equivalent land lease or sale deals in the same area/county.” (Krueger notes that the Corporate Accountability for Tax Expenditures Act, a bill she’s introduced repeatedly for years, would require state agencies and public authorities to report a dollar value for any economic assistance they give to private firms, though it would need to be amended to take into account land deals.) She adds that the concerns of the local community also need to be taken into account; the Belmont Park Community Coalition, a group that formed several years ago in response to plans for a New York Cosmos soccer stadium on the racetrack site, has complained bitterly that sports venues end up bad deals for minority communities like Elmont.

Public authorities and agencies are required to report their expenditures — including leases, which are considered a “disposition of property” — to the New York State Authorities Budget Office. But that also doesn’t happen until ninety days after the end of the fiscal year in which a contract is awarded, which in this case would be 2019 at the earliest. And according to ABO deputy director Mike Farrar, when it’s a “unique property” such as Belmont Park land that has few direct comparables, the agency will typically just assert that its lease is fair market value, since who’s to say otherwise.

ESD has two public meetings planned at the Elmont Memorial Library for March 22, where residents (and, no doubt, Islanders fans) will give officials from the agency’s newly formed Belmont Community Advisory Committee an earful about traffic and stress on local utilities and public drunkenness and whatnot. (The mayor of Floral Park issued an alarmed press statement on Wednesday noting that the just-released scoping document for the project includes plans for an electrical substation next to a school, and a 265-foot-high hotel that would be one of the tallest buildings in Nassau County.) But the biggest issue for New York State residents overall — from Long Island to Buffalo — may end up being that the Islanders group is paying pennies on the dollar for valuable public land at a time when the state is in the midst of a $4 billion budget deficit.

UPDATE: An ESD spokesperson contacted the Voice after publication to say that in according with its guidelines and state law, the agency will conduct an appraisal of the Islanders arena project land before the project is presented to the ESD board of directors following the conclusion of the environmental review in 2019.